How Does Term Life Insurance Work - Learn The Secrets
Deciding what kind of insurance to buy can be a real pain in the neck. Insurance salesmen can be very pushy and of course, no matter what they sell, their product is usually the only one that will give you what you are looking for. Before making any bad decisions, rest assured that term is the best you can buy and it's the most affordable. How does term life insurance work? Here goes....
Up until the 1970s all you could buy was what was called cash value or whole life policy. These policies mixed savings and life insurance. Then term policies appeared and the concept made a lot of sense: you buy nothing more than a death or burial, benefit. They were straightforward, they were cheap, and they served an important purpose. Policies were purchased for a length of time, the term, and if you died during that timeframe, the death benefit was paid.
The younger you are, the lower the premiums. Of course, the healthier you are will keep your premiums low as well. Some companies ask for samples of your blood and others will have you tested for drugs or tobacco products. They are looking for common diseases like diabetes, liver problems, high cholesterol, and even HIV.
Once these results are in, your premiums are determined. It's actually rare to have a company turn you down based on these results. Worst case, your premiums will be high. In certain situations you may find you have been 'rated'. In these cases your premiums can be very high but you are still insurable. This rating also stays on your record to alert other insurance providers that you are considered to be in a high risk category.
Unfortunately, mistakes can be made and some people are rated who should never have been. If you are rated, you do have the right to have the information corrected if it is wrong. Your doctor can submit documentation showing that you do not have the disease or condition that has caused this rating. It could take a while to have the problem solved, but it's in your best interests to indeed get it corrected.
One of the many benefits of term insurance is that one policy covers an entire family - parents and children. Cash value policies cover only one person, making coverage for families very expensive. As an example, a young husband and wife who want coverage of $200,000 for each, and perhaps even a $15,000 child rider (which covers all the children, not just one), can expect to pay less than $100 a month for this level of protection.
When you buy a term policy, you are getting nothing more than the death benefit equal to the face value of the policy. You aren't forced to pay monthly premiums to save in an investment portfolio. Should you die during the time the policy is active, the money is immediately paid out to the beneficiaries.
Parents are sometimes hesitant to have their children covered, however, unexpected deaths happen even to children. All too often families find themselves in financial despair and find it difficult to pay for their child's funeral. The child rider is there to relieve you form this financial burden at a time when you're likely to be suffering from emotional stress.